Contract Law Chapter 1

Front 1

What is the contract formula?

Back 1

K = O + A + C + ( Legality + Capacity)

Front 2

Importance of "freedom of contract"

Back 2

Two or more persons can agree to almost anything

Front 3

Importance of "sanctity of a contract"

Back 3

contracts are sacred (so to speak) and courts generally will uphold them.

Front 4

Objective theory of contracts

Back 4

Courts do not favor trying to consider what the parties to a contract were actually thinking when they entered into the agreement. Courts consider what the reasonable person would have thought under the same or similar circumstances.

Front 5

contract

Back 5

a legally binding agreement between two or more persons (or entities such as a business). The parties to a contract must either act or refrain from acting, depending on the circumstances of the agreement.

Front 6

Pacta sunt servanda

Back 6

agreements must be served

Front 7

nudum pactum

Back 7

empty promises

Front 8

meeting of the minds

Back 8

often referred to as "mutual assent."

Front 9

bilateral contract

Back 9

a promise for a return promise; an exchange of promises

Front 10

unilateral contract

Back 10

a promise for an act (in return); you accept by performance

Front 11

The three P's of contract drafting

Back 11

Predict what might happen during the course of the contractual arrangement.
Provide for it in the contract.
Protect yourself in the event of a breach.

Front 12

Can anyone draft a contract?

Back 12

As long as one is not giving legal advice (unless he is a licensed attorney), almost anyone can draft a contract.

Front 13

Common Law v. UCC (Uniform Commercial Code)

Back 13

The study of contract law is generally divided into two major parts: Common law contracts and the Uniform Commercial code. The common law includes all the judge-made legal principles involving contract interpretation. (American legal principles --> English system --> Ancient Roman Law) UCC was developed to address the increased and fast-paced buying and selling of goods and their delivery throughout the US. The UCC is a model act that all states have now adopted in its entirety or to some degree particularly with regard to the sale or lease of goods.

Front 14

Restatement of Contracts

Back 14

The American Law Institute (ALI) composed the Restatement of Contracts in 1932 and revised it with the Restatement (Second) of contracts in 1979. The Restatement (Second) of contracts represents the black-letter law.

Front 15

American Law Institute (ALI)

Back 15

A private organization founded in 1923 to improve the law by examining and bringing together the common law of all the states. It has also promulgated Restatements of the law on Property, Torts, and Agency, for example.

Front 16

All contracts are described as being v_____, v_____, and v______.

Back 16

Valid, Void, and Voidable

Front 17

Valid contract

Back 17

A valid contract is an agreement that is legal binding and enforceable.

Front 18

Void contract

Back 18

A void contract is one that is not binding and not enforceable.

Front 19

Voidable contract

Back 19

A voidable contract is binding and enforceable

Front 20

Express contract

Back 20

An express contract is the most common type of contract because the parties have explicit (clear) terms. This can be written or oral.

Front 21

Implied contract

Back 21

An implied contract focuses on the words or conduct between the parties as opposed to whether there is a clear intent to form a contract. Courts are usually asked to imply a contract to prevent unjust enrichment by a party to another "as if" there was a contract, when in fact there really was no an express agreement between the parties at all. Implied contracts are considered in two ways: implied-in-law (sometimes referred to as Quasi contracts). A contract in which a court decided that the parties acted if they had one.

Front 22

Implied-in-fact contract

Back 22

An implied-in-fact contract is where the agreement of the parties is indicated by their conduct rather than an explicit agreement.

Front 23

Implied-in-law contract

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An implied-in-law contract is one in which an obligation is imposed by a court to avoid injustice or to prevent unjust enrichment. No promise was actually made in an implied-in-law contract.

Front 24

Doctrine of promissory estoppel

Back 24

The doctrine of promissory estoppel is used b courts in extraordinary cases only and to avoid unjust results where an injustice can be avoided only by enforcing the promise. Under the doctrine of promissory estoppel (sometimes referred to as detrimental reliance), a party who has reasonably relied to his or her detriment based upon another's promise may still be able to enforce that promise (or part of the promise) to the extent of the reliance. The plaintiff must demonstrate that the promise was made, however, and this can be extremely difficult.

Front 25

quantum meruit

Back 25

"as much as he or she deserved"

Front 26

Principle of Quantum Meruit

Back 26

Courts often use the principle of quantum meruit to determine how much a plaintiff should receive in an implied or quasi contract situation. This usually means the reasonable value of the services provided and the market value of the materials furnished.

Front 27

There are four legal theories by which a plaintiff may allege that there should be a recovery of damages in the event there is a contractual dispute whether the dispute is the result of an oral or written disagreement or breach:

Back 27

1. Express contract
2. Implied contract
3. Quasi contract (P gives something to D and P expects something in return).
4. Promissory estoppel (D makes a promise to P and P relied to his/her detriment on the promise).

Front 28

Statute of Frauds

Back 28

The principle where certain types of contract must be in writing in order to be enforced by a court.

Front 29

Plain Meaning Rule

Back 29

Courts generally hold that if a word had a special meaning in that contract, then the parties are better served if they had defined that in the contract itself.

Front 30

Parol Evidence Rule

Back 30

Excludes explanations as to what a word meant if it contradicts the plain, ordinary meaning of a word in a written contract.

Front 31

Four Corners Rule

Back 31

When good contract drafters utilize their skills by adding a merger clause that attempts to limit the consideration of extrinsic evidence of what the parties meant by their contract or by their specific words.

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Executory contracts

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Executory contracts are not yet fully completed. One or more of the parties still has an obligation remaining as part of the original agreement.

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Executed contracts

Back 33

Executed contracts (or "fully executed contracts") are completed ones, or ones in which are substantially completed. In some industries, the term "executed" might mean simply the signed contract (by both parties) even if performance has yet to begin at all.

Front 34

Formal contracts

Back 34

There are few formal contracts anymore today. Formal contracts required a special process or even a seal (maybe a notary public). Buying and selling real estate is a formal process.

Front 35

Informal contracts

Back 35

Informal contracts are sometimes referred to as simple contracts.

Front 36

L. S.

Back 36

Stands for Locus sigilli which means the "place for the seal" in Latin. It is an abbreviation at the end of a contract or other legal document.

Front 37

Collective Bargaining Agreement (CBA)

Back 37

A CBA is a contract that spells out the terms of employment between a labor union and management (i.e., the employer). This negotiated contract concerns wages, hours of work, and other terms and conditions of employment. It also includes provisions for grievance and alternative forms of dispute resolution if there are disputes over the contract.

Front 38

Personal Services Contracts

Back 38

A personal service contract is one in which the parties (or the party to perform) must possess special knowledge or a unique skill such that no performance except that of the contracting party could meet the obligations of the contract. California limits the amount of time anyone can be held to a contract for personal services to a maximum of seven years. Personal service contracts cannot be assigned by the talent or uniquely skilled individual(s) to another as a matter of contract law since the very nature of the contract is based upon the uniqueness of their skills.

Front 39

De Havilland Law

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The seven-year limitation law for personal service contracts in California.

Front 40

Riders

Back 40

Sometimes called riders, technical riders, or merely an addendum to a contract, contract riders include the unique and particular aspects of a deal. riders are especially common in the insurance industry.

Front 41

Waiver

Back 41

A waiver is a voluntary relinquishment of a privilege or a right. Waivers (or release of liability) is a clause in a contract or its own document designed to protect a party from liability for personal injuries that may occur to others. Waivers may be used as protection from liability for accidents, activities carrying certain inherent risks, and even ordinary negligence or other unintentional conduct in certain circumstances. Waivers are sometimes referred to as disclaimers, releases, or exculpatory clauses as well.

Front 42

Termination of a Contract

Back 42

A contract usually ends where each party to the contract simply does what they promised to do. Another way to terminate an agreement is by contract, where each party agrees to end the contract prematurely. In the event one party breaches (i.e., breaks) the contract or unilaterally cancels the contract, litigation or other form of dispute resolution such as mediation or arbitration may be necessary to enforce the agreement.

Front 43

Contract Defenses

Back 43

Contract defenses are means in which a party to a contract can attempt to demonstrate to a court that the contract should end, the party should be excused from performance, or the agreement should be considered invalid. The strongest defense to any contract is that one party actually lied to the other. this defense is referred to as fraud, fraudulent inducement, or misrepresentation. It is difficult to prove, but if provable, it would likely result in the undoing of a contract. though courts generally mandate that parties to an agreement should read the terms of the agreement before signing the contract, failure to read the agreement would not normally prevent someone from still utilizing the defense of fraud. Other defenses to a contract include duress and bilateral (mutual) mistake.